Monday, May 16, 2011

Five Steps to Sustainable Home Ownership

Just to make sure your home ownership is sustainable, California Escrow Service share five steps to home ownership.

Get educated. The first thing you must do is to learn all you can about mortgage loans so you are able to apply for the best loan for your situation. Fixed-rate mortgages, adjustable-rate mortgages, FHA and VA loans, conforming jumbo loans, hybrid loans and others each have an advantage for the right borrower.

You also need to know what makes the same loan cost you more than others, from credit scores, to paying discount points to bring the interest rate down, to lenders’ fees.

Get Your Finances in Order. All government guaranteed loans such as FHA and VA and conforming loans that are sold to the secondary market are enforcing stricter guidelines.

Establish a Budget. When you apply for a loan, your lender will tell you how much you are able to afford based on your maximum gross income and income-to-debt-ratios. To purchase carefully within your means, your mortgage payments should not exceed 28 to 33 percent of your total monthly gross income.

Start Saving. Depending on the type of loan you think you will acquire, you should have cash reserves to make your down payment and closing costs. Earnest money, a deposit to the seller, is generally required, beginning at about $500 to two percent of the purchase price. This is subtracted from your closing costs at closing.

Get pre-approved. A preapproval entails you have shared your financial information with a lender. The lender has pulled your credit report and matched your income and debt ratios to various loan programs to see where you qualify. Once you and the lender agree to a loan program, the lender will issue you a preapproval letter with a maximum amount for the loan.

You can purchase a more luxurious home than the loan amount only if you are able to furnish the difference in cash. Use the preapproval as your best lead to shop for the right home. 

Homeownership isn’t for everybody; however it may be the right move for you. If you intend to stay in your home a number of years to build equity, and you can afford your home without excessive financial stress, you’re a good candidate to be a homeowner.

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